Dealing with complex federal regulations, like ERISA, is anything but simple. However, there are some important things for plan administrators, employers, and Plan Participants to know about when facing the possibility of ERISA litigation. When the potential for litigation over an ERISA plan arises, the first thing to do is talk to your experienced ERISA litigation lawyers to make sure you are protected.
Many disputes over employee benefits never make it to court. ERISA provides multiple levels to resolve claims before going through litigation. Initially, a dispute over benefits is generally handled directly with the insurance company or plan administrator. If the plan administrator or insurance company denies the employee's claim, the employee generally has to proceed through the plan's appeals process before they can seek relief in court.
During the plan's internal appeals process, the plan must comply with specific ERISA requirements in communicating with the plan participant. This includes providing a reason for why the plan made a decision or denied a claim. It also requires providing the participant with information regarding their rights to appeal the decision and when they can file a claim with the Department of Labor or take their claim to court.
After exhausting the administrative process, the employee may then be able to file a legal claim in federal court. This process between the internal review and court filing provides multiple ways for the plan to dismiss a claim. If the claimant files a lawsuit before exhausting the plan procedures, the plan provider may be able to seek a dismissal of the claimant's lawsuit. Additionally, if the plan's internal appeals deadline expires during the time it takes to dismiss the lawsuit, the claimant may be denied the right to have their claim reconsidered and be denied relief in court--hence the importance of the participant knowing and strictly following the Plan's administrative claim process and appeal procedures.
Deadlines are also important for benefit plan providers. ERISA provides timelines for claims and appeals. In many cases, the insurance plan may inform the claimant to seek an extension to provide a decision. However, this also requires the plan provider inform the claimant in writing that it needs an extension and give a legitimate reason for requiring an extension.
Before an administrative appeal or ERISA litigation, a plan participant may request information about the plan from the plan administrator. ERISA requires plan administrators to respond within a certain period of time to written information requests under penalty of fines. According to statute, an administrator who fails to comply with a written request for information within 30 days after the request may be personally liable to the plan participant for up to $110 per day.
Plan administrators often provide boilerplate responses when denying claims. While this boilerplate language may cover the plan in a majority of cases, administrators should review their standard procedures for responding to disputes to make sure they comply with ERISA requirements. This includes the entire process through making an initial claim decision through denying a final appeal. Failure to provide the necessary information within the required deadlines can result in a court overturning a denial of benefits and expose the plan and employer to additional liability.
If you have any questions about ERISA requirements or ERISA litigation, Butterfield Schechter LLP is here to help. We are San Diego's largest law firm with a concentration on employee benefits and ERISA compliance. Contact our office today.